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Hi Tutor,
We have JIT, Kaizen costing, TQM, SIX SIGMA, apart from some main things, all of them are basically about reducing cost, is that correct? So, knowing main things about each and then writing generic things about cost reduction, improving processes and elimination of work would make any sense to you?
God bless.
No. They are not primarily about reducing cost, they are primarily about increasing quality and for JIT, flexibility.
Often increasing quality will save costs (eg by having fewer goods returned from customers) but this might paying more for raw materials. Overall, costs could go either way. If they go up on balance then the company would hope for extra revenue eg by selling their top quality goods at a higher price. On balance costs might go down (eg less external failure cost might outweigh prevention costs). Then the company might have a win-win: lower costs and better quality opening the possibility of increased revenue.
You will rarely be expected to write anything generic in this exam. You must always address the details in the scenario.
Okay, Thank you, Tutor.
One more thing I would ask here relating to Kaizen costing is, after setting target cost for each production function, it is summed up to give product target cost. Does this become the baseline for first year of production – or – after the production in year one the actual cost becomes the baseline for the next year?
Thank you.
Actual cost should not usually be next year’s baseline cost. If it were then inefficient production one year would produce a sloppy, easy target for the next year. Of course, costs over budget must be fully investigated.
With Kaizen, the aim is to make continual small improvements to all processes which should gradually improve efficiency and lead to lower. costs.
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